Ichor Holdings

Industry regulation · Safety and environmental regulations

We are subject to a variety of federal, state, local and foreign laws and regulations governing the protection of the environment or addressing climate change. These environmental laws and regulations include those relating to the use, storage, handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes.

Legal and litigation · Intellectual property disputes

We may in the future receive claims that our products, processes or technologies infringe the patents or other proprietary rights of third parties. Any litigation regarding our patents or other intellectual property could be costly and time-consuming and divert our management and key personnel from our business operations.

Data and privacy · Data protection and privacy laws

We are subject to federal, state, and international laws relating to the collection, use, retention, security, and transfer of customer, employee, and business partner personally identifiable information, including the European Union's General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA) and similar effective or proposed state legislation.

Legal and litigation · Litigation and legal proceedings

We may in the future be named as a defendant from time to time in other lawsuits and regulatory actions relating to our business, such as commercial contract claims, employment claims and tax examinations, some of which may claim significant damages or cause us reputational harm.

Human capital and workforce · Key personnel dependence and succession

Our future success depends in part on the continued service of our key executive officers, as well as our research, engineering, sales and manufacturing personnel, most of whom are not subject to employment or non-competition agreements. Competition for qualified personnel in the technology industry is particularly intense.

Supply chain and procurement · Supplier financial distress and capability

Our ability to meet our customers' demand for our products depends upon obtaining adequate supplies of quality components and other raw materials on a timely basis. The loss of or failure to perform by any of our key suppliers could materially adversely affect our ability to deliver products on a timely basis.

Human capital and workforce · Labor relations and union negotiations

While we have not experienced any material work stoppages at any of our facilities, any stoppage or slowdown could cause material interruptions in manufacturing, and we cannot ensure that alternate qualified personnel would be available on a timely basis, or at all.

Core operations · Quality control and product defects

A number of factors, including design flaws, material and component failures, contamination in the manufacturing environment, impurities in the materials used and unknown sensitivities to process conditions, such as temperature and humidity, as well as equipment failures, may cause our products to contain undetected errors or defects.

Project and contract management · Large contract concentration

By virtue of our largest customers' size and the significant portion of our sales that is derived from them, as well as the competitive landscape, our customers are able to exert significant influence and pricing pressure in the negotiation of our commercial arrangements.

Geopolitical and trade · International conflicts and tensions

The COVID-19 pandemic, geopolitical instability, including the conflict between Russia and Ukraine, the conflict in the Middle East, actual and potential shifts in U.S. and foreign trade, economic and other policies, and rising trade tensions between the United States and China, as well as other global events, have significantly increased macroeconomic uncertainty at a global level.

Natural and catastrophic events · Natural disasters and extreme weather

Our facilities could be subject to a catastrophic loss caused by natural disasters, including severe weather, fires, earthquakes or other events, including a terrorist attack, a pandemic, epidemic or outbreak of a disease. Increasing concentrations of greenhouse gasses in the Earth's atmosphere and climate change may produce significant physical effects on weather conditions.

Geopolitical and trade · Trade policies tariffs and sanctions

Changes in U.S. or international trade policy, tariffs, and import/export regulations may have a material adverse effect on our business. For example, a recent Bureau of Industry and Security (BIS) rule, which restricts the export of products when provided for use in certain semiconductor manufacturing activities in China, has impacted and may continue to impact our sales and operations.

Market position and competition · Pricing pressure and margin compression

We face intense competition from other suppliers of gas or chemical delivery subsystems, as well as the internal manufacturing groups of OEMs. Increased competition has in the past resulted, and could in the future result, in price reductions, reduced gross margins or loss of market share.

Market position and competition · Market cyclicality and demand volatility

Our quarterly sales and operating results have fluctuated significantly in the past, and we expect them to continue to fluctuate in the future for a variety of reasons, including demand for and market acceptance of our products as a result of the cyclical nature of the industries we serve.

Customer and revenue · Customer concentration and key customer dependence

For 2023, our top three customers accounted for a combined 82% of sales, and we expect that our sales will continue to be concentrated among a very small number of customers. We do not have any long-term contracts that require customers to place orders with us in fixed or minimum volumes.

Innovation and product development · Intellectual property protection and infringement

Our business is largely dependent on the know-how of our employees, and we generally do not have an intellectual property position that is protected by patents. We rely on a combination of trade secrets and contractual confidentiality provisions and, to a much lesser extent, patents, copyrights and trademarks to protect our proprietary rights.

Strategic execution · Merger acquisition and divestiture risks

The process of integrating an acquired business, product or technology may produce unforeseen operating difficulties and expenditures, fail to result in expected synergies or other benefits or absorb significant attention of our management.

Market and investment · Interest rate and yield curve risk

Borrowings under our credit facilities are generally subject to variable interest rates, which fluctuate depending on macroeconomic factors, and expose us to interest rate risk. If interest rates increase, our debt service costs on these borrowings would also increase.

Capital structure and performance · Debt management and refinancing

As of December 29, 2023, we had total principal outstanding of $135.0 million under our term loan facility and $115.0 million under our revolving credit facility. Our credit facilities contain certain restrictive covenants and conditions, including limitations on our ability to incur additional indebtedness or contingent obligations.

Digital transformation and innovation · Technology obsolescence and evolution

Rapid technological innovation in the markets we serve requires us to anticipate and respond quickly to evolving customer requirements and could render our current product offerings, services and technologies obsolete.